NEW YORK - — Anxious investors sent stocks plunging Thursday as surging commodities prices fed fears that the Federal Reserve would extend its two-year streak of interest rate hikes. The major indexes saw their biggest one-day drops since mid-January.
The sharp decline reflected Wall StreetÂ’s deep disappointment with the Federal ReserveÂ’s statement on Wednesday that more rate tightening could be needed to counter inflationary pressures from energy and metals. Investors were hoping for signals that rates have been raised enough to keep inflation in check.
But Thursday, worries about overseas supplies sent crude futures racing past $73 a barrel, and gold prices jumped to a fresh 25-year high. The commodities strength spooked a market looking for clarity on an economy teetering between growth and inflation.
The Dow plunged 141.92, or 1.22 percent, to 11,500.73, its largest slide since falling 213 points on Jan. 19. A day earlier, the Dow came within 75 points of its best-ever close of 11,722.98, reached on Jan. 14, 2000.
Broader stock indicators also fell steeply. The Standard & PoorÂ’s 500 index slid 16.93, or 1.28 percent, to 1,305.92, and the Nasdaq composite index lost 48.04, or 2.07 percent, to 2,272.70.
Interest rate concerns weighed on the dollar and bonds, with the yield on the 10-year Treasury note climbing to 5.16 percent from 5.13 percent late Wednesday. The U.S. dollar pulled back from earlier gains against the Japanese yen and was flat versus European currencies.
It is President Bush's Anti-Great Society Program--destroy the social safety net of the federal government by cutting social programs' budgets, and then give out huge tax breaks to big corporations and rich elites, all while fighting two wars overseas. Oh, and pay for it, not by raising taxes, but by turning on the government's printing presses and just print dollars until the sun doesn't shine. George Bush is following the same playbook as Lyndon Johnson was in providing guns and butter during the 1960s with Vietnam and Johnson's Great Society anti-poverty programs. The only difference here is that Johnson was using the government to try to end poverty and create a social safety net for Americans, while also fighting his war in Vietnam. President Bush is using the federal government to not just destroy the Great Society safety net of President Johnson, but also to create a government-paid safety net for big corporations and rich elites. And Bush has got two wars to fight in Iraq and Afghanistan, with a third war on the way in Iran, to Lyndon Johnson's one war in Vietnam.
However you spin this, it is going to spell disaster for the American economy. Lyndon Johnson turned on the printing presses to pay for his guns and butter. Bush has had the printing presses going full blast for the past five years--and another three years to go for his administration. Inflation is going to kick in soon, with higher prices that will hit businesses, consumers, and investors. Look at what has happened today--inflation worries and energy prices have slammed the Dow down by 141 points, the Nasdaq is down 48 points. Interest rates are rising--and the Feds are signaling that rates could still rise even further. Oil and gas prices can still go up, especially if investors are nervous about an upcoming American attack against Iran. If inflation pressures start forcing prices to rise, American consumers are going to cut back on their spending. The Feds are going to continue raising interest rates as a means to combat inflation, forcing businesses to cut back on investment in new factors of production. We're going to see the worst of both worlds--stagflation, where you could have a deep economic recession in the U.S., and rising prices due to inflation. It happened from the mid-1970s to mid-1980s.
But I fear that this will be much worst than what we've seen in the 70s.
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